ILA opposes P3 Network

The president of the International Longshoremen’s Association (ILA) has written to the Federal Maritime Commission asking them to block the proposed P3 Network of Maersk, MSC and CMA CGM, saying it would “present an unprecedented risk of anti-competitive practices” and that it “presents a clear danger to workers and their families.”
In the letter, ILA President Harold Daggett wrote, “Such a drastic consolidation of capacity naturally leads to questions as to the long-term impact of such an agreement upon the industry as a whole. Having reviewed the agreement, I believe that there exists a great danger that the P3 Carriers could use the agreement in such a manner so as to squeeze out competitors and, eventually, non-carrier entities such as shippers and terminal operators.”
Daggett said the agreement would “allow the P3 Carriers to use their newly found collective scale not only as a shield against market volatility, but as a sword against their competitors and other entities within the chain. If not ultimately deemed illegal, these provisions certainly demand clarification.”
Daggett used Article 5.1 of the agreement filed with the FMC for his argument. The article allows the carriers to assign vessels to lanes and services in order to maximize cost efficiences while also allowing the parties to discuss all aspects of scheduling and services. "It does not require much imagination to read Article 5.1(b) and 5.1(c)," he wrote, "to enable the P3 carriers to use their collective power to engage rivals in a bidding war or to extort terminal operators and even local governmental agencies for preferential treatment."

Daggett

Expressing concern about the ability of the P3 to put bigger ships into service, he wrote, “Playing such a scenario out to its logical conclusion, one can easily foresee the formation of numerous other carrier alliances created for the sole purpose of distributing the capital costs associated with increasing vessel capacity in an effort to stay competitive with the P3 Carriers. However, perhaps the most apparent effect of the P3’s drive toward increased capacity is that other small carriers will simply be forced out of the market. While the P3 Carriers may be reacting to present market conditions, it is clear that they are setting out to define and control the future marketplace.
“If the proposed agreement is approved by the Federal Maritime Commission, the P3 Carriers will be able to coordinate with shippers and offer increased services on routes or in ports that are currently being serviced by carriers that cannot achieve the same efficiencies as the P3 Carriers,” he continued. Daggett said if the P3 members allocate slot capacity and use slots in the manner prescribed in Section 5.2 of their agreement, “a member-carrier may be able to eliminate the need to call at a particular port by renting slots on a vessel with a higher TEU from a fellow P3 Carrier, thereby reducing the demand for terminal operations and labor in that port. Correspondingly, the ability of each terminal operator or other company obligated to make payments to fringe benefit funds via local contracts will also decrease.”
Finally, Daggett argued that the deal would "undermine" the current Master Contract and collective bargaining agreements.
“The revenues generated by a robust and competitive shipping industry support several thousand longshore families and retirees," he wrote. "The P3 agreement stands to create efficiencies of labor for the parties that simply cannot be matched by many of the Master Contract signatories. As a result, the agreement presents an alliance that threatens not only the business interests of the parties’ competitors, but also the livelihoods of their employees."